Canada June retail rise a notch on autos but trend is weak
CANADIAN June retail sales grew by 0.1 per cent from the previous month driven mostly by car sales, data showed on Wednesday (Aug 23), a sign of weak consumer spending that could convince the central bank that interest rate hikes are sinking in.
The slight June gain was led by increases at motor vehicle and parts dealers as well as petrol stations and fuel vendors, Statistics Canada said. Excluding sales of cars and car parts, retail sales declined 0.8 per cent in June.
Economists had forecast June sales would be flat and that they would fall 0.3 per cent excluding autos. Sales were likely up 0.4 per cent in July, the agency said in a flash estimate.
“Canadian consumer spending continued to sputter in June,” Tiago Figueiredo, an economist at Desjardins Group, said in a note. “The latest data will probably leave central bankers comfortable keeping rates on hold for the remainder of the year.”
The bank hiked its benchmark overnight rate to a 22-year-high of 5.0 per cent in July after inflation hit a four-decade high of 8.1 per cent last year. It was the 10th increase since March 2022.
After the retail sales release, money markets pared bets for a quarter-percentage-point rate hike in September. They saw a 19 per cent probability after the release of the data, compared with a 27 per cent probability beforehand.
The Bank of Canada said it would study data closely before moving again. Since July the data has been mixed. Annual inflation jumped more than expected in July to 3.3 per cent, while the economy unexpectedly shed jobs the same month.
The Bank of Canada has projected that inflation would hover around 3 per cent for about a year, before creeping down to its 2 per cent target by the middle of 2025.
The central bank will have second-quarter gross domestic product data, due on Sep 1, to take into account before the next rate announcement on Sep 6. REUTERS
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